Negative rates and QE forever?

The change in the ECB’s policy guidance, announced yesterday, strengthens our view that the Bank will leave its deposit rate unchanged at -0.5% until beyond 2025 and will continue with large-scale asset purchases for a long time yet. Meanwhile, although we don’t think the surge in virus numbers will derail the economy, it may take the shine off the recovery. Next week we expect to learn that euro-zone GDP rose by around 1.5% q/q in Q2 and that inflation edged above 2% again in July.